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Probably need to upgrade a lot of your hardware if you want a gaming PC.
I would get a new board that supports DDR3 RAM, and a quad-core CPU. Build from there up, as your current set up wouldn't run modern games at a framerate/speed that would be fun. GPU's about a year or two old can run most games these days without sacrificing too much, but if you want the best looking s#it, expect to pay more. You could do a really good set up for $750.
Or just go the easier route and get the PS3 set up you mentioned. However, I don't know what size 1080 TV you'll find for $550. You'll find a lot of 720's though.
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